The ‘Net As A Utility – Arcs of Political Discourse

In the years between his sensational appearance as a Junior Senator before his colleagues at the Democratic National Convention in 2004 and his election in late 2008, Barack Obama carefully built a public profile of a quasi-radical reformist who, at the same time, is in touch with the world and realistic about the limits and power of politics. He consistently and systematically demonstrated his eagerness to make things better and fairer for the average citizen of his country, the economy and the world. You could argue, and many have since the early parts of his campaign in 2008, that Obama vastly over-promised. His campaign for ‘CHANGE’ had the power to convince even the most disenfranchised voter, the apolitical class.

Just a few short years later, Obama’s pre-election rhetoric seemed as far from his actual policy as his predecessor’s posturing about the US’s military successes in the Middle East. What happened? Being elected to office, I guess; Large-scale domestic and international SIGINT/eavesdropping, Guantanámo, the current mess in Iraq and Afghanistan, his back-pedalling on environmental policy. The US Economy is arguably in a better place than it was when he took over, but he hasn’t managed to revive it to an extent that would safeguard it for the future, while inequality is still a massive social issue in the US.

Over-promising inevitably resulted in under-delivering and this could not possibly exclude issues like regulating the Internet, that are somewhat less important, at first glance, than healthcare or war.

Obama’s policy on the openness of the ‘Net was, effectively, the lack of any policy. The FCC, lobbied intensely by the few monopolies that rule both backbones and the last-mile in the US and the affluent stakeholders in those oligopolies and monopolies, failed to provide any safeguards for the open Internet; in 2013 we saw the first open dispute between a technology company (Netflix) and cable providers when the former saw the performance of its service degrade to the point where it threatened its survival. Netflix ended up paying those providers to make sure its videos reached consumers in reasonable speeds and the end of the open, fair, Internet had begun.

Bandwidth Matters

When confronted with the importance of network neutrality, of the open internet, Telcos, especially those existing in an oligopolistic environment, such as the cable providers of the United States, will immediately point out how internet based services, like those offered by Netflix, Apple or Google, leech on their investments by consuming increasingly more bandwidth for their services. They claim that those companies do not pay for this bandwidth and they should. But that is just a lie.

Telcos consistently make considerable profits, even after considerable investments, taxes and operational expenses. They get paid several times for every single byte that crosses their network, be it from their peers, companies connected to their networks, or — in the case of vertically-integrated providers also serving consumers — by the end-users themselves.

Cable providers in the United States go a step further than your typical ‘vertical integration’. Their services span the enterprise, home, entertainment, network inter-connection, the last-mile; they have branched out to providing streaming video services themselves, TV and movies on demand, telephony and data services in addition to the nascent electronic marketplaces, a result of our increasingly digital economy.

And while their profits are driven by market demand, the Federal Government in the US, as with several other governments in Europe and Asia, have spent several billions of dollars, bolstering infrastructure, connecting public institutions or supporting research to that end.

The Arc

Obama’s announcement is certainly a very welcome one. It is extremely hard for anyone to postulate any sort of meaningful argument in favour of the current situation where a few telecommunications suppliers dictate terms for the entire world. It could be that his Presidency has entered its final two years, that he has few qualms about being re-elected or passing groundbreaking legislation after losing both chambers of Congress, or that his performance, to date, with a few exceptions here and there, has been lacklustre. It could only be that he’s feeling the need to bolster his legacy, but his change of heart regarding the Internet is in stark contrast to his previous position of indifference on the matter.

And even with his announced policy this change is not even close enough to effect change. With a relatively weak FCC, powerful lobbies and vested interests by the vast media companies on one hand and the few, powerful, technology companies aiming to become those dictating terms and currently depending on the ‘net, it remains to be seen how this will play out and how the actors will react.

The classification of the (open) internet as a utility, however, means nothing at all unless it is accompanied by a slew of regulatory and financial frameworks that work. There are several metropolitan areas in the United States where only one electricity, one telecommunications and one internet provider is offering its services to a certain neighbourhood or building block; this is effectively a monopoly. This is a market failure, underpinned by a regulatory failure. Sadly, the same thing happens with every other utility.

The main issues in regulating of utilities in the United States, and elsewhere, highlight a failure, by the government, to effectively manage situations where the market has failed or will consistently fail, exactly because those services are both expensive to provide and basic necessities of modern life. Utilities happen to be prime examples of such market failures.

Governments need to act, responsibly, by formulating operating frameworks for those companies that put the consumer, innovation and competition first, while allowing them to thrive and be profitable. They also need to invest in helping competition, when the market fails to respond. While these frameworks and these policies are not in place, as is the case both in the United States and elsewhere, policies like those announced by the Obama administration for the Internet have no real effect on those services.

When it comes to utilities, we’ve already seen somewhat extreme policies at play; on one hand we’ve got the ‘laissez-faire’ policies seen in the United States, where private organisations effectively divided territory and roamed free, resulting in oligopolies for every single utility. This was, and remains, expensive and frequently resulted in sub-par services for the consumer and lack of innovation. Then we had the European ‘state-owned’ policy that was also largely ineffective, backward and expensive, but is in the process of being deregulated — badly — with governments frequently failing to provide adequate protection for consumers, enticements for new entrants and an equal playing field; obviously there are exceptions, both in the United States and in Europe.

There is room for more efficient, consumer-friendly and competitive regulation of utilities and Obama’s policy may be the beginning of that. Not because he chose to, but because the existing environment, players and economics suggest it might. Let’s just hope his policy ends up being more than words.

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